Why South African Startups Fail

Updated on 23 September 2014

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Why South African startups fail

South Africa’s very own serial entrepreneur Alan Knott-Craig Jr shared his views why South African startups fail – on the pitfalls and challenges that many South African startups face in getting their businesses off the ground. Knott-Craig Jr was one of the featured speakers at the Social Media Week Johannesburg, which kicked off yesterday at the Branson Centre of Entrepreneurship.

The event was attended by Branson Centre’s entrepreneurs.

Knott-Craig Jr is the founder and CEO of Project Isizwe, a non-profit organisation facilitating the roll-out of free Wi-Fi networks across Africa, and World of Avatar, an investment house for mobile apps for the African market. He is also the former CEO of Mxit, Africa’s biggest mobile social network.

Having founded and funded 17 companies in the TMT (telecoms, media and technology) sector in Africa between 2003 and 2013, Knott-Craig Jr knows a thing or two about starting businesses, and more importantly, the reasons most of them fail.

“When you’re thinking about money all the time, you can’t move forward or get ahead”

Choose your business partners wisely

One of the biggest reasons startups fail according to Knott-Craig Jr, is because entrepreneurs end up “getting into bed with the wrong people” he says, referring to choosing business partners. Knott-Craig gives the personal example of his departure from Mxit in 2012 – just a year after buying into the company through his World of Avatar venture.

“While the shareholders and I share the same vision, we differ on how to get there,” he said. “Therefore, I agreed to go my own way. This is why it’s very important to know who you’re in business with.”

Another reason startups fail according to Knott-Craig is money.

“When you’re thinking about money all the time, you can’t move forward or get ahead,” said Knott-Craig Jr, whose latest project is completely funded by the government, a decision he believes has taken away the pressure of sourcing financing, and has left him with the freedom to work on his business.

“Entrepreneurs have to get involved in every aspect of their business, not just bring in the ideas”

“Instead of worrying about how you’re going to get money to start your business, think more about how this business is going to make money and sustain itself.”

Micro-manage your startup

Knott-Craig stressed that business owners – especially small businesses – have to micro-manage every aspect of their startup, and not just delegate, or only be involved in the big decisions.

Many startups fail, he said, because entrepreneurs – who are the ideas factory – get bored easily and neglect even the smallest parts of running a business.

The discussion concluded with the message that Africa, not just South Africa, needs to make failure acceptable. Outside of Africa, he said, they embrace failure and use it as a stepping stone to success, whereas in Africa we are intolerant of just the idea of failure and that hampers our learning.

Social Media Week will run until 26 September at the Branson Centre of Entrepreneurship.

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